Doling out Justice

It may be the least popular ride for most adult visitors of Walt Disney World, but “It’s a Small World” remains a prescient piece of entertainment. It accurately predicted how business and technology would help shrink the planet to bring us all closer together – at least as far as commerce goes. But with this internationalization of business comes an international flavor of crime, which has become a focus of the U.S. Department of Justice (DOJ).

Philip Giordano, now with Kaye Scholer LLP, spent more than 15 years as a prosecutor in the Antitrust Division of the DOJ, most recently as a trial attorney in the National Criminal Enforcement Section. I recently sat down with Giordano to discuss the challenges the DOJ faced in this increasingly globalized society.

“Over the course of the last 15 years, on the criminal enforcement side of things, a major expansion of the enforcement program has occurred, from largely domestic cartel activity to a focus on international cartels that affected U.S. consumers,” Giordano explains. “As the economy globalized, the cartel conduct tended to globalize as well, and what the Antitrust Division found was that the cartels affecting the U.S. affected greater and greater amounts of commerce in the country, not just with domestic manufacturers but increasingly with the foreign manufacturers in the global economy.”

Giordano notes that foreign manufacturers had less of an antitrust mindset, not having an ingrained sense that it constituted criminal conduct. They imagined it was a misdemeanor, not the felony it is in the US under the Sherman Act. The DOJ needed to send a message, to show how the enforcement was going to be handled in relation to foreign manufacturers.

Today, these large, international cartels continue to be an issue, alongside the domestic enforcement program, of course. Giordano notes the growth of international enforcement over the past decade or so, with total fines increasing tenfold over that period – and generating big headlines in the process.

In addition to the fines that have been doled out, U.S. regulators have taken it upon themselves to educate overseas businesses on the benefits of having training programs and guiding and assisting other nations in drafting laws so that enforcement efforts can be truly international. Specifically, the U.S. views cartel conduct as criminal activity, and this attitude has been taken up by other nations, such as the U.K., Japan, Brazil and other nations that have added a criminal prosecution element to their civil enforcement programs.

Training, Giordano stresses, is of utmost importance when it comes to a robust compliance program, as companies need to be proactive about training members of their own organizations on the line between proper and improper conduct. But, he says, there is another factor to keep in mind. “Agencies in the U.S. and overseas have structured these programs around leniency programs, whistleblower programs,” he explains. “If you are the whistleblower, you can benefit tremendously from non-prosecution agreements that might be unavailable to you if you are not taking that posture with the investigating agency.”

These whistleblower or leniency programs are structured so that if a company come under investigation, there are incentives not just for the examination of the conduct that the grand jury is investigating, but also the examination of corporate conduct in general. More stringent examinations hope to determine if unlawful conduct occurred with regard to other products, or policies. These are incentives aim to bring that conduct to the DOJ’s attention.

“Of course, you want to avoid these problems in the first place,” Giordano notes, “so if there are conduct issues, locate them internally and deal with them as soon as you can.”